Shopping on line can be easy, simple and save you lots of money. It can also take a lot of your time, frustrate you, and result in unwanted purchases. Now the same can be said for regular high street shopping, but with the vast opportunity presented by the Internet it will pay you to spend a few minutes reading this and understanding how to better optimize your Penetration Pricing shopping experience:
1. Compare - without doubt the biggest advantage that the Penetration Pricing offers shoppers today is the ability to compare thousands of Penetration Pricing at a time. This is a great thing, but not necessarily all the time! Too much can be daunting at times so take advantage of the great comparison sites and where possible let them do the hard work for you.
2. Research - if it has been said it will be on the internet. Ignorance is no longer a justifiable reason for buying the wrong thing. Take the time to research in detail everything that you could possible want to know about
3. Testimonials - don't know anybody that has bought a Penetration Pricing? Wrong! If the Penetration Pricing is good the internet will let you know. Use the Internet as a friend and get testimonials before you buy.
4. Questions - Got a question about Penetration Pricing then search the Forums, FAQ's, Blogs etc. Don't be afraid to ask .....
5. Reputation - Never heard of the company selling Penetration Pricing? Don't worry, no reason why you should know every company in the world, but you know someone that does! Use the internet to find out what people are saying about Penetration Pricing and build up a picture of their reputation for sales, returns, customer service, delivery etc.
6. Returns - still worried that even after all of the above your Penetration Pricing wont be what you want? Check out the returns policy. There is so much competition now that someone, somewhere is bound to offer the terms that you are comfortable with.
7. Feedback - happy with your Penetration Pricing then let people know, after all you are depending on others people input in your buying decision, so why not give a little back.
8. Security - check for the yellow padlock on the Penetration Pricing site before you buy, and the s after http:/ /i.e. https:// = a secure site
9. Contact - got a question about Penetration Pricing, or want to leave a comment then check out the sites contact page. Reputable companies have them and respond.
10. Payment - ready to pay for your Penetration Pricing, then use your credit card or PayPal! Be aware of companies that don't accept them, there may be genuine reasons but given the huge amount of choice you have when buying online there is no reason at all not to buy via credit card or PayPal.
For other pricing strategies and policies please see here: Pricing Strategies
Penetration pricing is the
pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price. The expectation is that the initial low price will secure market acceptance by breaking down existing brand loyalties. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than short term profit maximization.
The advantages of penetration pricing to the firm are:
- It can result in fast diffusion (business) and adoption. This can achieve high market penetration rates quickly. This can take the competition by surprise, not giving them time to react.
- It can create goodwill among the all-important early adopter market segment. This can create valuable word of mouth.
- It creates cost control and cost reduction pressures from the start, leading to greater efficiency.
- It discourages the entry of competitors. Low prices act as a barrier to entry (see: porter 5 forces analysis).
- It can create high stock turnover throughout the distribution (business). This can create critically important enthusiasm and support in the channel.
- It can be based on profit maximization, which is economically efficient.
The main disadvantage with penetration pricing is that it establishes long term price expectations for the product (business), and image preconceptions for the
brand and company. This makes it difficult to eventually raise prices. Some commentators claim that penetration pricing attracts only the switchers (bargain hunters), and that they will switch away from you as soon as you increase prices. There is much controversy over whether it is better to raise prices gradually of a period of years (so that consumers don’t notice), or employ a single large price increase (which is more efficient). A common solution to the price expectations problem is to set the initial price at the long term market price, but include an initial discount coupon (see sales promotion). In this way, the perceived price points remain high even though the actual selling price is low.Another potential disadvantage is the low profit margins may not be sustainable long enough for the strategy to be effective.
Price Penetration is most appropriate when:
- Product demand is highly price elasticity of demand.
- Substantial economies of scale are available.
- The product is suitable for a mass market (ie.: sufficient demand).
- The product will face stiff competition soon after introduction.
- There is inadequate demand in the low elasticity market segment for price skimming.
- In industries where standardization is important. The product that achieves high market penetration often becomes the industry standard (eg.: Microsoft Windows) and other products, even superior products, become marginalized. Standards carry heavy momentum.
An interesting variant of the price penetration strategy is the bait and hook model (also called the
razor and blades business model) in which an initial product is sold at a very low price but subsequently purchased products (such as refills) are sold at a higher price. This is an almost universal tactic in the desktop printer business, with printers selling for as little as $100 and including two ink cartridges, which cost $30 each.
Taken to the extreme, penetration pricing becomes
predatory pricing, when a firm initially sells a product at unsustainably low prices to eliminate competition and establish a monopoly. In most countries, predatory pricing is
antitrust, although it can be difficult to distinguish predatory pricing from penetration pricing.
See also
For other pricing strategies and policies please see here: Pricing Strategies
Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price. The expectation is that the initial low price will secure market acceptance by breaking down existing
brand loyalties. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than short term profit maximization.
The advantages of penetration pricing to the firm are:
- It can result in fast diffusion (business) and adoption. This can achieve high market penetration rates quickly. This can take the competition by surprise, not giving them time to react.
- It can create goodwill among the all-important early adopter market segment. This can create valuable word of mouth.
- It creates cost control and cost reduction pressures from the start, leading to greater efficiency.
- It discourages the entry of competitors. Low prices act as a barrier to entry (see: porter 5 forces analysis).
- It can create high stock turnover throughout the distribution (business). This can create critically important enthusiasm and support in the channel.
- It can be based on profit maximization, which is economically efficient.
The main disadvantage with penetration pricing is that it establishes long term price expectations for the
product (business), and image preconceptions for the
brand and company. This makes it difficult to eventually raise prices. Some commentators claim that penetration pricing attracts only the switchers (bargain hunters), and that they will switch away from you as soon as you increase prices. There is much controversy over whether it is better to raise prices gradually of a period of years (so that consumers don’t notice), or employ a single large price increase (which is more efficient). A common solution to the price expectations problem is to set the initial price at the long term market price, but include an initial discount coupon (see sales promotion). In this way, the perceived price points remain high even though the actual selling price is low.Another potential disadvantage is the low profit margins may not be sustainable long enough for the strategy to be effective.
Price Penetration is most appropriate when:
- Product demand is highly price elasticity of demand.
- Substantial economies of scale are available.
- The product is suitable for a mass market (ie.: sufficient demand).
- The product will face stiff competition soon after introduction.
- There is inadequate demand in the low elasticity market segment for price skimming.
- In industries where standardization is important. The product that achieves high market penetration often becomes the industry standard (eg.: Microsoft Windows) and other products, even superior products, become marginalized. Standards carry heavy momentum.
An interesting variant of the price penetration strategy is the bait and hook model (also called the
razor and blades business model) in which an initial product is sold at a very low price but subsequently purchased products (such as refills) are sold at a higher price. This is an almost universal tactic in the desktop printer business, with printers selling for as little as $100 and including two ink cartridges, which cost $30 each.
Taken to the extreme, penetration pricing becomes predatory pricing, when a firm initially sells a product at unsustainably low prices to eliminate competition and establish a monopoly. In most countries, predatory pricing is antitrust, although it can be difficult to distinguish predatory pricing from penetration pricing.
See also
Penetration pricing - Wikipedia, the free encyclopedia
Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price.
Pricing - Wikipedia, the free encyclopedia
... geographical areas, referred to as zone pricing? Should there be quantity discounts? What prices are competitors charging? Do you use a price skimming strategy or a penetration pricing ...
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type=long) A page looking at pricing policy and considering the impact of price elasticity and penetration pricing and skimming pricing on the level of sales revenue.
Penetration Pricing - Definition by InvesTerms Financial Glossary
Penetration Pricing Launching a new product line at a low price to quickly capture as large share of the market as possible.
penetration pricing - Hutchinson encyclopedia article about ...
Pricing strategy whereby a firm initially sets a low price in order to gain a market share in a mature market by persuading customers to try the product.
Penetration Pricing
Description of Penetration Pricing. Explanation and definition. ... Definition Penetration Pricing. Description. Penetration Pricing is a market-based approach to pricing ...
Westburn Publishers Ltd - penetration pricing policy
penetration pricing policy. Definition: Policy of launching a new product at a low price in order to capture quickly as large a share of the market as possible.
SAS | Solutions and pricing: Security penetration testing
Project title: Security penetration testing : Industry sector: Insurance
Pricing methods
Penetration pricing: Used for new products wanting to gain market share. The product is priced low so that it is able to get a hold in the market.
